Health Economics: Medicare and Medicaid Hospital Reimbursement Jacobi Medical Center Noon Conference Feb 14, 2011 Colin D. Cha Fong
Goals Brief introduction to Medicare and Medicaid How the hospital is reimbursed by these programs for the care you provide patients Describe some considerations of hospital management related to our patient census Provide insight into some of the reasons why you work with SW, case mgt, and documentation specialists
Overview of Medicare and Medicaid
Medicare Established in 1965 Covers 3 primary groups Aged 65 and older Some with disabilities Hemodialysis About 47 million individuals 39 Million age 65 and older 8 million non-elderly with disability 2010 Kaiser Family Foundation: Medicare Chartbook
Different Parts to Medicare A Inpatient hospital or SNF B Physician services, some supplies C Medicare Advantage D Prescription drug benefits
Medicaid Established also in 1965 Covering primarily the indigent Based on poverty level Covers prescriptions Administered individually by each state
Medicaid in NY Covers about 4.7 million individuals $1 billion alone to administer across state Calendar year 2009 about $46 billion in expenditures Most expensive program in the country State of NY, DOH Nov 2010 Medicaid Administration Report
How much does the country spend? Per these numbers, 23% of federal spending goes to Medicare/aid Kaiser Foundation Fact Sheet
How do we fund these programs? Medicare Federal Insurance Contributions Act (FICA) 6.2% contribution to Social Security Trust Fund 1.45% contribution to Medicare Matched by the employer Medicaid Managed by states and funded by state with contribution from the federal government (typically 50% in NY) And where do these funds come from?
Your check from HHC Medicare Tax = 1.45% = 32.68 2253.73 (Gross Pay) 1.45% matched by HHC With permission from member of housestaff
What about Medicaid? With permission from member of housestaff
Where do those Medicare taxes go? Part A: Inpatient Payments
Hospital Reimbursement
A digression to hospital management First, remember not-for for-profit does not mean no profit. Second, think about a hotel...
How much does one night cost? Daily rate, as of 2/10/11 If you were to go to patient accounts and say, I have no insurance and I d like to pay for my entire stay... How much would the room cost alone be for one day?
If you were to pay out of pocket Gen Med bed - $2730/night ICU bed - $4130/night Now add on labs, EKGs, imaging, etc.
Few people actually pay those rates So reimbursement depends on who s paying Medicare Medicaid Private/commercial insurance Other No insurance
What about patients with no insurance? Emergency Medicaid, which can turn into Medicaid Unless you do not have citizenship Once active, is good for 6 months, need to recertify Functions and is paid like Medicaid Does not mean they will get Medicaid
What if no medicaid? Say, we apply for emergency medicaid and it is rejected. Charity pool for uncompensated care Charity care
And a little background on insurance coverage in the US... Medicare to the rise of managed care Now think about a table for 4 in a restaurant...
Diagnosis Related Groups (DRGs)
Diagnosis Related Groups Classification system based primarily on diagnoses, age, treatments received intended to reflect the resources utilized in caring for a given group of patients For reimbursement, the DRG essentially leads to a flat fee paid to the hospital to provide all the necessary care for a given patient
History of the DRG 1960s developed, piloted in the 70s 1983 Social Sec Act amended to include a national DRG-based hosp prospective payment system 80s updated yearly, but by Medicare and focusing on issues affecting the elderly Late 80s AP-DRG system developed 2007 MS-DRG system, severity adjusted 2009 APR-DRG system
Starts with a diagnosis Remember the principal diagnosis field in the discharge summary? That diagnosis gets translated into a code for billing and epidemiological purposes As do the comorbid conditions you write and document in your H&P, progress notes, etc
How many codes count? For Medicare, determined based upon the coded chart from the Principal Dx Up to 8 Additional Dx Up to 6 Procedures during the admission
ICD-9 9 now and ICD-10 coming The diagnoses you write are categorized under codes, the current system is called ICD-9 International Classification of Diseases Updated yearly Hospitals are currently transitioning to a new system, ICD-10, active Oct 1, 2013 Fiscal Year 2014 start 10/01/2013
DRG 312 Syncope and Collapse Diagnoses 458.0 Orthostatic hypotension 458.2 Iatrogenic hypotension 780.2 Syncope and collapse
DRG 313 Chest Pain 786.50 Unspecified chest pain 786.51 Precordial pain 786.59 Other chest pain (sometimes where MSK gets put) V71.7 Observation for suspected cardiovascular disease However, it s missing one commonly used diagnosis
ROMI Is a plan, not a diagnosis or a problem R/o ACS is a plan, not a diagnosis R/o PNA is a plan, not a diagnosis Etc, etc, etc
Some advantages of the DRG system A system for classifying, not exact, but a system that is manageable Allows for comparison Relate Case Mix Index to resource utilization Allows for simpler reimbursement without consideration of too many variables (prognosis, treatment difficulty)
What is the Case Mix Index? Often thought of as reflecting the acuity of our patients (higher meaning more ill) However, the DRG system was designed to reflect costs or resources utilized A measure of the resources consumed by our patients Essentially, the avg DRG weight for all of our patients Take all the DRGs,, sum the weights and divide by the number of DRGs
What about Weiler? Jacobi Medical Center 330127 Case Mix Index 1.4712 Montefiore 330059 Case Mix Index 1.6093 But Comprises Monte-Moses, Moses, North, Weiler Monte-North formerly, Our Lady of Mercy
Back to operating a hospital Think again about the restaurant...
All patients are not the same A pneumonia patient could be simple or hard to provide care for Different levels of acuity Medicare Severity - DRG MS-DRG system developed To capture severity of illness
MS-DRGs adopted by Medicare As of 10/1/2007 (the start of Fiscal Year 2008) Expanded to 745 MS-DRGs Three severity levels MCC: With major complications or comorbidities CC: With complications or comorbidities Non CC: Without complications or comorbidities
Medicare Severity system MCC (major complications and comorbities) 1603 codes (51 pages in a PDF file) CC (complications and comorbidities) 3491 codes (93 pages in a PDF file) Non-cc (no complications or comorbities)
DRG 193 Simple Pneumonia and Pleurisy 193 Simple PNA and Pleurisy with MCC 194 Simple PNA and Pleurisy with CC 195 Simple PNA and Pleurisy w/o CC/MCC Reimbursement accordingly is higher or lower
But the differences can be big
Some DRGs are not broken out Syncope & Collapse (DRG 312) Chest pain (313) So, if patients are ultimately placed in these DRGs,, it does not matter what their comorbid conditions are Some DRGs have a second level So, a given DRG can have 1 to 3 levels
Common CCs (Complications and Comorbidities) Systolic or diastolic heart failure BMI > 40 SIRS CKD Stage IV or V HTN with CKD, any stage Hypo or Hypernatremia Acute Kidney Failure
Common Major CCs End Stage Renal Disease (on HD not Stage V) Sepsis, Severe Sepsis, Septic Shock Acute systolic or diastolic heart failure Pressure ulcers, Stage III or IV Pneumonia Pulmonary embolism HIV
How many do you need? For Medicare and this MS-DRG system, you only need one CC or one MCC to qualify for the respective level For example, if you patient is on HD he or she will have a major cc... Anytime the patient is admitted, regardless of the cause Which makes sense because there can be complications and dialysis needs to be provided while they are inhouse However, this may not affect anything like routine chest pain admissions the DRG only has one level
Medicare is watching Hospitals scrutinize the system and in turn, Medicare monitors the billing Acute kidney failure, unspecified Used to be a MCC, but as of Oct 1, 2010 was downgraded to a CC
Words that don t count here CHF... Without further clarification CKD... Without a stage Obesity... Without a BMI
So, here s the CC list again- What s familiar about it? Systolic or diastolic heart failure BMI > 40 SIRS CKD Stage IV or V HTN with CKD, any stage Hypo or Hypernatremia Acute Kidney Failure Pressure Ulcer, Stage III or IV
... Those Quadramed interrupts Doctor, if you think this patient has SIRS, please document in the chart. Morbid obesity was documented, please document BMI > 40 Did this patient have hyponatremia? If the pressure ulcer was present on admission, please document.
Why did the clinical documentation specialist ask me to document Present on Admission?
Hospital Acquired Conditions HAC were implemented as of Oct 1, 2008, Hospital Acquired Conditions 3 criteria high cost, high volume, or both Are assigned to a higher paying MS-DRG when present as a secondary diagnosis, that is when present lead to a higher paying DRG could reasonably have been prevented through the application of evidence-based guidelines Deficit Reduction Act of 2005, Section 5001 Federal Register, Vol 75, No 157, p50080
Hospital Acquired Conditions for FY2011 Air Embolism Blood Incompatibility Pressure Ulcer Stages III & IV Falls and Trauma With fracture, dislocation Catheter-Associated UTI Vascular Catheter-Associated Infection Manifestations of Poor Glycemic Control
Hospital Acquired Conditions for FY2011 Foreign Object Retained After Surgery Surgical Site Infection Mediastinitis following CABG following orthopedic procedures spine/neck/shoulder/elbow following bariatric surgery DVT/PE following Total Knee Replacement or Hip Replacement
Financial impact Implemented as of Oct 1, 2008. From Medicare s perspective they save because the DRGs are not higher For October 2008 to September 2009 (Fiscal 2009), it was estimated that about 18.8 million dollars were saved by this The point it is here to stay Federal Register Vol 75, No 157, p50097
One commenter noted that DVT/PE might be unreasonable because it is unclear how many would be prevented by EBM CMS responded that this year data on these HACs would be released for review and reconsideration The list can be amended, but one concern is that it will only become larger.
Medicaid uses APR-DRGs All Patients Refined Diagnosis Related Group Addresses Medicaid population and non-elderly population Specifies based on severity Minor, moderate, major, and extreme Includes a mortality score
APR-DRGs In contrast to the MS-DRG system, the severity is based not on the presence of one particular factor (that is a cc or mcc) Levels of severity are assigned based on the mix of complications/comorbids comorbids present, both The severity of a particular factor The combination of comorbids
APR-DRGs Better reflects true acuity Sepsis is one thing, But sepsis with acidemia or ARF is much more concerning on the floor
Calculating a Hospital s Payment CMS Website
Step 1: Base payment Rate Each hospital has a base payment rate This is standard amount applying broadly to all hospitals like a base unit of payment Based upon labor and non-labor costs Labor costs adjusted by wage index Non-labor costs adjusted by a cost-of of-living adjustment factor
Standardized Rate for FY2011 Labor Nonlabor National $3552.91 $1611.20 Based on 1981 hospital costs per hospital data submitted to Medicare Annual adjustment called hospital market basket or cost-of-living
Wage Index and Adjustments Jacobi 330127 (Medicare provider number) Wage Index 1.3122 (same as Monte s) Cost-of of-living adjustment 2.35% Hospital required to submit data on quality Reduced 2% if you do not submit the data Think CHF, AMI, PNA patients
Regional differences in labor cost CBSA Code 41884 35644 19740 Urban Area San Francisco-San Mateo- Redwood City New York-White Plains- Wayne, NY-NJ NJ Denver-Aurora Aurora-Broomfield, CO 3 Yr Estimated Avg Hourly Wage 51.6877 44.1205 35.6538 48540 Wheeling, WV-OH 23.089
Step 2: Assign a DRG Our clinical documentation is coded and sent to an outside company/system to submit to Medicare Each patient admission is assigned a MS-DRG which carries a certain weight This weight is a multiplier factor that is multiplied times the base payment rate
Range of weights MS-DRG 001 227 871 292 202 313 795 Name Heart Transplant or Implant of Heart Assist System w MCC Cardiac Defib Implant w/o Cardiac Cath w/o MCC Septicemia or Severe Sepsis w/o MV 96+ Hours w/mcc Heart Failure & Shock w/cc Bronchitis & Asthma w/cc/mcc Chest Pain Normal Newborn DRG Weight 26.3441 (Highest) 5.1936 1.9074 1.0302 0.8424 0.5499 0.1649 (Lowest)
CHF vs CHF w/icd placement MS-DRG 001 227 871 292 202 313 795 Name Heart Transplant or Implant of Heart Assist System w MCC Cardiac Defib Implant w/o Cardiac Cath w/o MCC Septicemia or Severe Sepsis w/o MV 96+ Hours w/mcc Heart Failure & Shock w/cc Bronchitis & Asthma w/cc/mcc Chest Pain Normal Newborn DRG Weight 26.3441 (Highest) 5.1936 1.9074 1.0302 0.8424 0.5499 0.1649 (Lowest)
Differences in weights MS-DRG Name DRG Weight 193 194 Simple Pneumonia & Pleurisy w/mcc Simple Pneumonia & Pleurisy w/cc 1.4796 1.0152 195 Simple Pneumonia & Pleurisy w/o CC/MCC 0.7096
Step 3: DSH Payment Payment for those hospitals that care for a larger percentage of low-income patients Added on, not a multiplier May depend on percentage or sometimes if a hospital serves a very large region
Step 4: Indirect Medical Education For approved teaching hospitals Add-on percentage payment For the extra costs anticipated in a teaching program, such as Testing for academic purposes Unnecessary ordering of labs, imaging, etc.
Direct Graduate Medical Education payments Also, the hospital receives direct funding from Medicare for support of the residency program
Step 5: New technology add-on Add-on payment for admissions utilizing new technologies, specified by CMS What about cases that stay for months?
Step 6: Consider as outlier If the costs for an admission are exorbitant, the hospital receives extra payments for these outlier cases Added on to MS-DRG adjusted base rate There are cost thresholds specific to each DRG
In summary Base rate x DRG weight = DRG adjusted rate DRG adjusted rate plus, if applicable, -DSH payment -Indirect Medical Education -New technology add on -Outlier payments
Last analogy We ve covered the basic framework for payments by Medicare and Medicaid - Inpatient Back to the restaurant idea, but now think about it as if it is an all-you you-can eat, fixed price buffet If we are paid a fixed amount at the end of the day for a patient, how else can the hospital increase its revenue?
Take home message the Don ts Do not try to game the system Do not falsify your documentation or order procedures so the hospital can get more reimbursement Do not oversimplify our entire clinical situation to an all-you you-can eat buffet (and say that Dr. Cha Fong told you so) it s only an analogy
Take home message The Do s Treat your patient first and foremost. Document accurately and specifically so that the hospital can be reimbursed appropriately. Understand better how interdisciplinary care helps the hospital and more importantly, our patients well-being. Appreciate the economic environment for the hospital now and for you in the future.
Any questions?